Question

Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts:

	Book Values				Fair Values
Current assets	$	20,250			$	20,250
Building		110,250				65,150
Land		17,250				28,550
Trademark		0				34,600
Goodwill		37,500				?
Liabilities		(50,250	)			(50,250	)
Common stock		(100,000	)
Retained earnings		(35,000	)

1&2. Prepare Allerton’s entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts: $132,000 and $86,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

SOLUTION

1. Exchange amounts $132,000

Account titles and Explanation	Debit ($)	Credit ($)
Current Assets	20,250
Building	65,150
Land	28,550
Trademark	34,600
Goodwill	33,700
Liabilities		50,250
Cash		132,000

Goodwill under acquisition method

	Amount ($)
Fair value of consideration transferred	132,000
Fair value of net identifiable assets	98,300
Excess of goodwill	33,700

2. Exchange amounts $86,000

Account titles and Explanation	Debit ($)	Credit ($)
Current Assets	20,250
Building	65,150
Land	28,550
Trademark	34,600
Gain on Bargain Purchase		12,300
Liabilities		50,250
Cash		86,000

Bargain Purchase under acquisition method

	Amount ($)
Fair value of consideration transferred	86,000
Fair value of net identifiable assets	98,300
Gain on bargain purchase	12,300